Outsourcing overruns cost UK taxpayers £9bn

A think tank has called for 'root and branch change' in public services, following its damning report on ICT outsourcing

Research by the European Services Strategy Unit shows that 105 outsourced public sector ICT contracts have significant cost overruns, delays and terminations.

The unit examined large outsourcing contracts, PPPs, PFIs and strategic service delivery partnerships in central government, the health service, local authorities, public bodies and agencies over the last 10 years.

It found that cost overruns amounted to £9bn for the 105 projects, with an average percentage cost overrun of 30.5 per cent. It also revealed that 30 per cent of contracts were terminated and more than half (57 per cent) had cost overruns.

Many reports by the Public Accounts Committee, the National Audit Office and other organisations have tried to explain these problems, says the unit. But it also says these findings rarely get to the root of the problem because they focus almost exclusively on the procurement process.

It says that clearly some of the problems encountered by ICT projects are a result of over-ambition, a lack of design and development before procurement, and pressures for efficiency savings overtaking the ability to deliver. The technical complexity of ICT projects is also often undeestimated, it says.

Dexter Whitfield, the author of the report said: "The scope of the failures is shocking. The remedies do not lie in tinkering with the procurement process but with root and branch change in the modernisation of public services.

"The government's commitment to commissioning and contestability does not address any of the fundamental causes and will only make matters worse for ICT projects in the next decade."